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Government procurement allows public entities to contract commercial companies for goods and services, reducing costs and benefiting from specialist expertise. However, choosing the cheapest supplier may compromise quality and safety, and there may be a loss of control and accountability. “Best value” policies evaluate suppliers based on criteria beyond price.
Government procurement is the process by which government agencies and other public entities choose and contract commercial companies to provide goods and services. This will take place as an alternative to the agency or body that performs the service itself. The main benefits are cost reduction and the ability to benefit from specialist expertise. In most capitalist countries, these benefits are almost taken for granted, meaning that any argument usually concerns the scope and procedure of public procurement.
The rationale behind public procurement is twofold. The first major benefit is that it allows a government agency to choose between multiple vendors. This should establish price competition, thereby reducing costs for the agency and ultimately for taxpayers.
The other main argument for this type of procurement is that it allows for the use of specialists, rather than work done by internal employees. This may simply be a matter of expertise; a commercial firm will often have a better ability to identify, hire and train staff for a particular role than an agency managing a range of tasks. There are also economies of scale. A public body that only has to perform a certain task on a limited basis will not always find it worthwhile to invest in the kind of specialized machinery that a commercial company will buy, or to benefit from massive discounts on materials.
Some benefits of public procurement are disputed. One is the idea that being able to choose the cheapest supplier will always be the best option. There is debate whether this could lead to a supplier performing poor quality work or compromising safety standards. As a result, many government agencies employ procurement policies known by terms such as “best value”. This requires the body to evaluate potential suppliers based on a number of criteria, such as expertise and quality, rather than just price.
Another potential limit to the benefits of public procurement is the loss of control and accountability. It is possible that a private contractor hired to carry out a task cannot get it done on time. In that case, the public body will have a financial return in terms of penalty clauses, but this will not change the fact that the project is not complete. In turn, this can have political consequences for elected officials.
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